July 11, 2006 5:25 PM PDT

China gaining on U.S. chipmakers, CEO says

Related Stories

Freescale goes to market with magnetic memory

July 10, 2006
SAN FRANCISCO--China is closer than you think, says Mike Splinter, CEO of Applied Materials.

The state of semiconductor industry in China, fueled in part by government spending and policies, is improving rapidly and the country could achieve technological parity in chipmaking with the U.S. in a few years, Splinter said during a lunch meeting at Semicon West, a semiconductor equipment conference taking place here this week.

"It could take five to seven years to really close the gap," he said. "They have a lot of smart engineers that will be experts in chipmaking."

Parity, of course, will vary by field and subject matter. China has begun to sprout semiconductor equipment companies too, but the complexity of the industry will mean these companies will likely follow their Western counterparts for a while. Still, Applied is keeping an eye on developments. Applied garners about 85 percent of its revenue from overseas.

"It will probably take a long time, but it is a significant concern," he said. "There will be government pressure to utilize these companies," he said, referring to the Chinese equipment makers.

China right now imports most of its chips and its chipmaking equipment.

Others disagree with Splinter's assessment. In a separate interview Monday, Cypress Semiconductor CEO T.J. Rodgers said he recently visited China and is less afraid of China catching the U.S. than he ever was. A lot of the government funding, Rodgers said, seems to be going into lavish corporate headquarters.

On other topics, Splinter said that flash memory will continue to buoy the often painfully cyclical semiconductor equipment field. The Semiconductor Equipment and Materials Institute (SEMI), a trade group for equipment makers, said earlier this week that the equipment market will grow 18 percent to $38.8 billion in 2006.

The flash boom differs in a number of ways from the DRAM boom, and subsequent bust, of the 1990s.

For one thing, flash memory is being incorporated into a wide variety of products: cameras, cell phones and consumer electronics. Fifty percent of the orders in Applied's first quarter were for memory, he said.

The DRAM boom was fueled mostly by PCs. Excess factory capacity for DRAM ultimately lead to a glut despite rising PC sales.

Additionally, the companies producing flash are working to develop other applications of it. Samsung and Intel have also shown how flash can replace hard drives in notebooks.

"Is it sustainable? Certainly not in the long term. But in the short term, it is--in part because the companies making the investments will make it happen," he said. "They build these flash fabs, so they better have somewhere to sell it."

See more CNET content tagged:
Applied Materials Inc., Semiconductor Equipment, parity, China, semiconductor


Join the conversation!
Add your comment
Short in China
Hey, since this is on the C|Net "Business Tech" channel, I'll bring up some other economic information. Apart from the fact that at the current rate, China appears to be rapidly moving toward parity with US markets with respect to chip-manufacturing, thist article pointed out the critical flaw with Chinese business in general: government spending. In the United States, government is not the investor in technology, investors are. Is anyone besides me skeptical about the fact that the Chinese government is spending so much to acheive parity with the US semiconductor industry? I'm even more skeptical because China's central bank is absolutely awful. How awful? Let's say that conservative (Western) estimates of Chinese non-performing, zero-percent interest loans are in the 40% range. More pesimistic economists believe the rate may be higher than 50%. This contrasts with the "official" (doctored) figure of "one or two percent." Think about the Asian financial crisis of 1996-97, only much much much greater. Chinese banks not only have the horribly inefficient relics of communism but also are structured badly much like the Japanese banks. Beijing is spending much more money than it has; Hu and his henchmen know that. China is not worth anyone's investment. I'd go short in China in a heartbeat. But to go long, well I'd have to quote "How the Grinch Stole Christmas": "I wouldn't touch [it] with a...39 1/2 foot pole!"
Posted by CNerd2025 (98 comments )
Reply Link Flag
ok but
I wouldn't mind having one of those American jobs the Chinese are enjoying right now. The Chinese government is spending too much? They're spending it on their people! And the American government? Now who's long term.
Posted by GrandpaN1947 (187 comments )
Link Flag
Posted by EbiEslami2020 (1 comment )
Reply Link Flag

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot



RSS Feeds

Add headlines from CNET News to your homepage or feedreader.